With the availability of Social Security benefits facing an uncertain future, amassing one's own personal savings for retirement is quickly becoming essential for a large majority of Americans who hope to remain living in the style to which they are accustomed. Many people depend on employer-sponsored retirement plans, such as those provided pursuant to Sections 401(k) or 403(b) of the Internal Revenue Service code, to provide them with the adequate financial support they desire. Under the structure of such “defined contribution plans”, an employee will contribute personal funds to an account in the plan over his or her working life—often contributing to the account a designated amount or percentage of each paycheck—while a financial institution or other plan provider invests the contributions in financial securities, such as mutual funds selected by the employee, and manages the assets with the employee bearing the investment risk. In some defined contribution plans, the employee can choose from several pre-defined asset allocation portfolios, configured by the financial institution to offer different levels of investment risk. In some defined contribution plans, the employer agrees to match any contribution by the employee up to a certain amount or percentage, having the effect of “doubling” at least a portion of the employee's contribution each pay period.
However, many people do not take advantage of such retirement plans—thereby missing out on “free money” matched contributions from their employers—because they see the process of designating a contribution amount and selecting among the various investment options confusing and/or time-consuming. Some employers do not provide any self-service interface for employees to view and manage their retirement accounts, instead sometimes requiring a manual process of filling out forms. Other employers offer cumbersome benefits interfaces, which may be seen by the employee as an impediment to efficient management of that employee's defined contribution plan. Still others provide interfaces that contain a dizzying array of financial tools, graphs, charts and forecasts that could serve to confuse the average plan participant investor. Therefore, it is difficult to get existing and potential plan participants to engage themselves in planning for retirement. Additionally, many employees who do participate in employer-sponsored retirement plans do not fully understand the short-term and long-term financial impact of making a change to their contribution configuration. This lack of understanding can lead to less-than-optimal investment choices, both in terms of investment selection and contribution percentage.
What is needed is a simplified method and system to guide a user through the process of changing a contribution configuration in a defined contribution plan and showing the user a limited set of information which is essential in helping the user understand how a change to a contribution configuration affects both short-term and long-term financial planning and retirement savings goals.